Mr. FAULKNER. Well, if we are going to consider statistics, should we not consider the fact that two-thirds of the aged own their own homes, according to the Department of Health, ducation, and Welfare. Senator HARTKE. That is fine, I am in favor of home ownership and I am sure the Senator from Illinois is.

Mr. FAULKNER. I am sure we are all in favor of it.

Senator HARTKE. I am in favor of the other third owning their own homes.

Mr. FAULKNER. I agree with you, sir, and I suggest to you that the way to permit them to own their own homes is to do things which will keep our economy from want and to keep our democracy from the burdens of Government and free from the fetters of big Government as much as possible.

Senator HARTKE. You do use statistics in operation as an insurance company, I hope.

Mr. FAULKNER. Yes, sir.

Senator HARTKE. Because I have a few policies of my own and if you don't I want to know about it.

Mr. FAULKNER. If it is legal reserve company you are pretty well protected.

Senator HARTKE. You are familiar with the fact and I hope your actuary there or your statistician, would agree that one out of every four people born today has a right to expect to live to be 83 years of age.

Mr. FAULKNER. I think that is the fact according to the modern mortality table.

Senator HARTKE. And that the other three have a right to expect and can expect to live to be in their 60's, probably 63 years of age. Mr. FAULKNER. I believe that is so.

Senator HARTKE. This is a wonderful tribute to American progress, so by 1960, we have this situation for every 100 persons whose age is 60 to 64, there are 34 who now are 80. And these are primarily the parents and older relatives of those who are 60 to 64, the ones who were 80.

By the year 2000, for every 100 persons between 60 and 64 there are going to be 67 people over the age of 80. And I want to know just how we can expect this working population to provide for most of the medical costs of the parents as well as grandparents, not to mention the increased costs of raising their own families.

Mr. FAULKNER. Well, one of the ways is to permit the older person to continue to be productive.

Senator HARTKE. Productive. I am in favor of that. You mean to take off the $1,200 limitation on earning on social security? Mr. FAULKNER. That undoubtedly is an inhibiting factor.

Senator HARTKE. I would like to subscribe that to my bill if you would like, I introduced that bill so I am in favor of that. That is fine.

You know, I am going to quit with this, I think that this is a good statement, pardon me, I think it is a remarkable statement that you made that one should not deny the right of a child to take care of his parents. You see I have six children.

Mr. FAULKNER. You are going to be well cared for, Senator.

Senator HARTKE. And I have therefore six definite and distinct opportunities for them to take care of me in my old age, and I am going to try to instill them with this doctrine, and I hope that they will acquire this particular doctrine at an early age in life so that I can start my old age at the present age of 41. [Laughter.]

Mr. FAULKNER. Well, in the process of indoctrinating them, sir, you will build a stronger America.

Senator HARTKE. One other thing if I could, then: You say "Certainly the Congress will not wish to take any action which would halt this progress," and you speak of the progress of the voluntary health insurance program. "And destroy voluntary health insurance for the aged."

If you have any statistics or any information which would substantiate this generalization I am sure this committee would certainly like to know about it.

Mr. FAULKNER. Well, perhaps we can reason from the experience as to this in Canada. Health insurance is not like other kinds of insurance where it is possible for government and private insurers to coexist in the same field. To the extent that the Government provides a benefit in the health care area, it preempts the field, there is certainly no merit in having entitlement to a benefit at the public expense and then going out and buying the same benefit from a private insurer, and so it is our feeling, Senator, that to the extent that Government moves into this area the service of private insurers is precluded.

Senator HARTKE. But there is no really, you have no real facts or real anything to back this up?

Mr. FAULKNER. Well, in Canada, when they passed the national hospitalization program.

Senator HARTKE. For the aged?

Mr. FAULKNER. No, for the whole population.

Senator HARTKE. Well, now, we are talking about two different things. I don't want to beg words with you but we are talking about legislation that deals with the problems of health insurance for the aged.

Mr. FAULKNER. Would an aged person, who is entitled to certain benefits from Government expend the money to duplicate those benefits from a private insurer?

I think not.

Senator HARTKE. If he had an income of less than a thousand dollars, I would think they would.

Mr. FAULKNER. I am quite certain even if his income was $100,000 a month he would not do it.

gov

Why buy again what is handed to you? So in this area, when ernment moves in the private insurer is excluded. And there is a proclivity, Senator, as you must recognize from your study of social benefit programs in other countries, there is a proclivity of all of these social benefit schemes to burgeon to the point where they become universal.

Senator HARTKE. In other words, social benefits schemes implies a sinister meaning. Would you tell us what you have in mind?

I had in mind operation, operational here in the United States. Mr. FAULKNER. Well, sir, one cannot fail to observe that once the seed is planted of government's acceptance of responsibility for doing

some part of a social benefit job, that Congress is under an enormous pressure to accept for the Government responsibility for that same job for all the people.

Senator HARTKE. All I asked you was whether you would identify one social benefit scheme, I think that is the word you used, "scheme," which has had this disastrous effect, for the American people. Let's take the social security program as it has been instituted. Do you feel that is a scheme which reacted detrimentally?

Mr. FAULKNER. Well, I used the word "scheme," in its dictionary sense. There is no implication derogatory.

Senator HARTKE. It certainly has not destroyed the private pension programs of the insurance companies. In fact they have multiplied out of all proportion tremendously.

Mr. FAULKNER. Let's not confuse cause and effect, Senator.

Senator HARTKE. I am not saying cause and effect, I am saying as a practical matter since social security the private pension plans have expanded.

Mr. FAULKNER. Because during the period that we are considering private enterprise in the United States has moved ahead enormously, and it has provided our people with a higher standard of living, it has provided them with an income with which to secure for themselves all of these things.

Senator HARTKE. Yes, that is what I said.

Mr. FAULKNER. But life insurance is not health insurance, and that the value of a human life is without limit, and so it is quite possible for a man to be entitled to social security, and still if he has the competence to secure large amounts of life insurance, whereas if you are talking about health insurance if Government is providing him the benefit he has no need to secure it from private insurance.

Senator HARTKE. I want to get back to these social benefit schemes, I mean where is one of them?

How about unemployment insurance? That is considered a social benefit scheme. Is that what you mean by scheme?

Mr. FAULKNER. The scheme, sir, according to Mr. Webster, is simply an arrangement, and a device or a plan.

Senator HARTKE. All right, fine. Let's use whatever you want to use for the terminology and semantics. What social benefit program has been detrimental to the American people?

Mr. FAULKNER. I haven't implied, sir, that any existing social benefit scheme has been deleterious.

Senator HARTKE. If you stated this to me I have to recognize this and if I recognize this, I just want to know what it is I have to recognize.

Mr. FAULKNER. Potentially if Government accepts increasing responsibilities for the welfare of the individual person, the time will come when the tax burden will be such that your six children and the other youngsters of the next generation will say "Pop voted himself

too much.'

Senator HARTKE. Well, in other words, we really don't have any of these so-called schemes that we can point to, is that what you are telling me?

Let's forget about the potential and about Pop and those things.

I am talking about now, do we have any of these programs that you feel are detrimental?

In other words, possibly the Congress, if they are of such nature should consider repealing them.

Mr. FAULKNER. I am not suggesting that.

Senator HARTKE. Are there any of these schemes then as you indicated a while ago or is this something on which you ask me to just assume a general principle which you have enunciated?

Mr. FAULKNER. I am suggesting that as thinking people, part of our obligation is to look ahead, to anticipate consequences, and to so order our conduct as not to fall into boobytraps, as not to make life more difficult or impossible or not to burden our economy in such a way that the Americans cannt endure as a free people.

Senator HARTKE. I don't think anyone in the United States would so disagree with that statement.

Mr. FAULKNER. Good.

Senator HARTKE. When you come down to saying these schemes again, I can't get you to talk about them, and all I am asking you, and I am not trying in any way to take away from your testimony, but I would just like to know where these schemes are, and if we can agree that there are none to date, so then it is pretty good because the Congress and the United States have done fairly well so far.

Mr. FAULKNER. There is no argument about that, Senator, life is full of schemes, private insurance schemes, social benefit schemes, all kinds of schemes.

Senator HARTKE. I guess I am belaboring the point. Let me take one thing which I did forget. You talked about the hospital budgets, is that right, and how efficiently they are able to operate?

Mr. FAULKNER. I spoke, sir, only out of my experience in connection with one hospital, and a rather broad knowledge of the problems of hospitals generally.

Senator HARTKE. Recognizing their social benefit and their need for the people, the truth of it is that they do have certain tax benefits, do they not? I am not saying it is wrong, I just say they do have. Mr. FAULKNER. Yes.

Senator HARTKE. And the pay on a comparable basis as compared to the standing of nurses for the amount of education they required is not really in accordance with the general standard of comparable people is it?

Mr. FAULKNER. I could not agree to that, sir. I think the pay enjoyed by most registered nurses has been improved considerably and while they are certainly not overpaid, the pay scales for registered nurses broadly are not miserable.

Senator HARTKE. Those are all the questions.

Senator DOUGLAS (presiding). Thank you very much. The committee will recess until 2:30 this afternoon, when hearings will be resumed in the same room.

Mr. FAULKNER. Thank you, gentlemen.

(The following was subsequently received for the record:)

AMERICAN LIFE CONVENTION,

Chicago, Ill.

LIFE INSURANCE ASSOCIATION OF AMERICA,
New York, N.Y.

Hon. HARRY F. BYRD,

HEALTH INSURANCE ASSOCIATION OF AMERICA,
Washington, D.C., July 5, 1960.

Chairman, Senate Finance Committee,
Senate Office Building, Washington, D.C.

DEAR SENATOR BYRD: During the course of testimony by Mr. E. J. Faulkner on behalf of the American Life Convention, the Health Insurance Association of America and the Life Insurance Association of America on H.R. 12580, Mr. Faulkner was asked to supply certain additional information for the record.

1. Attached hereto is a list of 162 companies which sell policies of insurance to those aged 65 and above to assist in meeting the costs of health care. These coverages are diversified. Of recent origin are the mass enrollment 65-plus coverages which provide around $10 a day for room and board charges up to 31 or 60 days per confinement, plus hospital extras of up to $100 (or in the case of one company 80 percent of charges above a $100 deductible up to a maximum of $1,000), plus a surgical schedule with a $200 or $225 maximum. One company offers $5,000 major medical after a $500 deductible which can be used to supplement basic coverage. The cost of these coverages is approximately $7 to $8.50 per month. However, other individual policies offer a choice of benefit levels, some going up to $25 for daily room and board charges.

2. With reference to a question by Senator Douglas as to the proportion of benefits which present workers will carry into retirement, there is no specific documentation available on this point. In group insurance the general pattern among insured plans is to reduce benefits on retirement. In most instances, the benefits on retirement take the form of reduced maximum durations for hospital benefits or the imposition of calendar year or lifetime maximum benefits. The continuing coverage is substantial. For those individuals whose coverages are not continued, or who wish to supplement that which is continued into retirement, there is available the mass enrollment coverages referred to above.

3. During the course of testimony, Mr. Faulkner responded that loss ratio on individual policies would equal 66% percent. Mr. Faulkner appears to have misspoken himself because a more nearly correct figure for 1959 is estimated to be 56 percent, an increase of four to five points over 1958 for which year the loss ratio for individual hospital and surgical-medical insurance was 51.2 percent. In considering the ratio of losses incurred to earned income, it should be recognized that the percentage of premiums retained is no measure of the insurer's profit. For example, the hospital surgical-medical loss ratio for individual insurance for 1958 was 51.2 percent and for group insurance 91.8 percent. For 25 leading insurance companies these loss ratios resulted in an underwriting profit for the year 1958 of six-tenths of 1 percent of the premiums earned. Divided between group and individual, the results were an underwriting loss of approximately 1 percent of premiums earned on group and a profit of approximately 4 percent on individual policies.

Out of the percentage not paid out in claims, the insurers were required to set up reserves, pay taxes, dividends to policyholders, and expenses, including the cost of claim administration in the health insurance field. The expense is relatively higher in the individual policy coverages than in the case of group coverage. Individual contracts are sold through the agency system, premiums are collected on an individual basis and greater care must be exercised in underwriting to avoid antiselection.